Plugging Information Leaks

A former SanDisk employee was arrested on suspicion of leaking proprietary information about Toshiba’s semiconductor memory to SK Hynix. What makes this particularly interesting is SanDisk is one of Toshiba’s current business partners. The two companies have a joint venture in NAND flash, which competes with South Korea’s SK Hynix.

Nihon Keizai Shimbun broke the story last month. Sugita Yoshitaka is charged with industrial espionage for giving confidential information to other companies and competitors. The newspaper reported that Yoshitaka leaked a document involving NAND flash memory documents to SK Hynix of South Korea. He was arrested by the Tokyo Metropolitan Police Department under the Unfair Competition Prevention Act.

Yoshitaka, who was working in Toshiba’s Yokkaichi factory, was an engineer of SanDisk from April 2007 until May 2008, and in that role had access to the Toshiba’s server. He is charged with copying research data related to NAND Flash memory without permission. Officials said that data was recorded in the server log. When he changed jobs shortly afterward, moving to SK Hynix, he leaked the documents sometime around July 2008, according to the reports. Toshiba filed charges against Yoshitaka last July, and the Metropolitan Police Department is continuing to investigate.

Toshiba claims that SK Hynix illegally acquired and used the confidential information about the NAND flash technology, which has been co-developed and co-produced with SanDisk. Toshiba leveled those accusations in Tokyo District Court last month, seeking compensatory damages under the Unfair Competition Prevention Act. On the same day, U.S.-based SanDisk filed a complaint against SK Hynix in South Korea in Superior Court of California in Santa Clara County, and SK Hynix in the United States.

The case has snowballed since then. News stations in Japan have been reporting stories about Japanese engineers who transferred information to companies in Asia. In one interview, Taiwanese engineers expressed doubts about collaborating with Japanese engineers who are working in Korean companies for fear they, too, might leak confidential information.

It certainly is not a crime to start a new business or to change to another company, even if the reason is that their proposed ideas were not accepted in the company they are currently working in. Japan’s Constitution provides freedom of choice about where to work. But leaking proprietary data isn’t always so clearly defined when workers change jobs. For example, it is difficult for a company to strictly draw a line on the access of information within a company, particularly when it doesn’t involve paper or electronic data.

To guard against this kind of problem, some companies require employees to sign non-compete agreements, prohibiting them from going to work for rival companies within two years after leaving their jobs. Some companies also do not allow employees to have side jobs outside of their working hours. This is difficult to enforce, however. So is leakage of information when employees give talks or discuss technology in open forums—or when they change jobs and work with employees of other companies.

Compounding the complexity of this case, Toshiba and SK Hynix currently have a business alliance involving magnetoresistive RAM technology. MRAM is a completely different technology from NAND flash, and is being co-developed by the two competitors as a future technology.

The Japanese version of this article is located here.